If a Corporation Begins to Suffer Large Losses, Then the Default

Multiple Choice

If a corporation begins to suffer large losses, then the default risk on the corporate bond will ________, everything else held constant.

A) increase and the bond's return will become more uncertain, meaning the expected return on the corporate bond will fall
B) increase and the bond's return will become less uncertain, meaning the expected return on the corporate bond will fall
C) decrease and the bond's return will become less uncertain, meaning the expected return on the corporate bond will fall
D) decrease and the bond's return will become less uncertain, meaning the expected return on the corporate bond will rise